The Coronavirus Aid, Relief, and Economic Security (CARES) Act signed into law by President Trump on March 27th, 2020 established a refundable credit against an employer’s payroll and railroad taxes for employers who were affected by COVID-19 (Coronavirus) but retained their employees. For this credit, neither the employee nor the employer needs to be directly impacted by the virus.

Eligible Employers

  • Employers are eligible for this credit if there was a government order related to the pandemic that required the business to partially or fully suspend operations.
    • If the business is in New York State, these orders were executed by Governor Cuomo between March 14th, 2020 and March 20th, 2020 as part of executive orders No. 202.3 through 202.8.
  • Employers can also be eligible to receive this credit if the employer experienced a reduction of greater than 50% in quarterly receipts, as measured by a year-over-year basis.
    • For example, 2020 Quarter 2 receipts would need to be compared to Quarter 2 receipts from 2019.
      • If the change in receipts year over year is greater than a 50% reduction the employer would be eligible to take the credit.
  • Eligibility ends with the calendar quarter following the calendar quarter in which gross receipts exceed 80% of the corresponding calendar quarter of the prior year.

Eligible Employees

  • If the employer has less than 100 full-time employees, all employees’ wages are eligible, regardless of whether an employee is furloughed or not.
  • If the employer has more than 100 full-time employees, only the wages from employees who are furloughed or face reduced hours as a result of the employer’s closure or economic hardship are eligible for the credit.
  • For purposes of determining the number of full-time employees, the average from 2019 should be used.

Credit Calculation and Limitations

  • The credit is for 50% of eligible employee’s wages paid after March 12th, 2020 and before January 1st, 2021.
  • Wage and health benefits amounts that can be claimed are limited to $10,000 in the aggregate per employee for all quarters.
  • The credit can be claimed on a quarterly basis and is provided through December 31st, 2020.
  • Wages that are taken into account for the paid leave credits established under the Families First Coronavirus Response Act (Public Law No. 116-127) and for wages in which a credit is received under the work opportunity credit or paid leave credit as established by the Tax Cuts and Jobs Act (Public Law No. 11597) cannot be used to calculate the retention credit.

Who Cannot Take the Credit

  • A credit cannot be received if the employer receives a loan under the Small Business Association Paycheck Protection Program for 7(a) loans under Section 1102 of the CARES Act.
  • Federal, State and Local government employees are not eligible employees for the calculation of this credit.

Click here to download our spreadsheet which compares the Paycheck Protection Program to the Employee Retention Credit.

If you have any questions about the Employee Retention Credit for Employers, please reach out to your personal Sciarabba Walker contact or email us at